MSE News

Energy prices: 'The only way is up'

Households should brace themselves for energy price hikes, not just over the coming year, but over the next five years too, with one energy expert predicting bills could double.

Last winter the big six energy companies all implemented price hikes of between 6% and 11%, but energy experts say households are likely to be hit by further rises (see our Cheap Energy Club to cut bills).

Mark Todd, from comparison site Energyhelpline.com, says over five years they "could be up 50%-100%".

Providers themselves are also hinting at price rises. Only last week Scottish and Southern Energy (SSE) warned households that prices will continue to rise. It said unless wholesale prices fall, then it is "highly likely" these costs will be passed on to consumers.

Meanwhile, British Gas, despite pledging earlier this month to use increased profits from the bitter winter to keep prices on hold for "as long as possible", stopped short of announcing a formal price freeze for a defined period (see the British Gas price promise MSE News story).

Energy price predictions

Below are what four energy experts predict energy prices to change over both the coming year and over the next five years:

One year: "There is potential for bills to rise, even though wholesale energy prices have retreated from their multi-year winter highs."

Five years: "There is also the added cost of environmental taxes and social obligations which will continue to erode supplier margins, leaving little alternative but to pass these higher costs on to domestic users."

Mark Todd, from energy comparison site Energyhelpline, says:

One year: "All the supplier announcements and industry gossip appears to point to more energy price rises later this year of 5%-10%.

"Suppliers tend to say wholesale costs remain high, some say this March was very expensive due to a gas shortage and the cold weather, and that Government green policy keeps pushing up bills. Also the cost of the network – pipes and wires – keeps going up."

Five years: "Over the last 10 years domestic gas prices have risen 178%. So the long term trend is not good. If things follow the same path bills could be up 50%-100% in the next five years with typical energy bills over £2,000 and maybe getting towards £3,000."

Clare Francis, from price comparison site MoneySupermarket, says:

One year: "Energy prices only seem to be heading in one direction and that is upwards – even the government has warned the days of cheap energy are over and that we will all see the cost of gas and electricity rise over the coming years.

"One of the main reasons for this is the country needs to invest in alternative energy to protect supplies so our bills don't just move in line with wholesale prices as there are other factors."

Five years: "I'm sure they will continue rising."

Jo Ganley, from price comparison site uSwitch, says:

One year: "Although there have been predictions wholesale prices are likely to fall over the next couple of years and the recent pressure on wholesale prices has eased, we're not seeing any indication from suppliers this is going to translate into good news for consumers.

"All bets are now on again for a price rise later this year."

Five years: "We expect prices to continue rising. However, there are some unknowns: we don't yet know what the true impact of Government policy and the huge investment requirements in the industry will be."

Cutting costs

Anyone on their provider's standard tariff is almost certainly paying too much as the typical cost of such dual fuel deals is around £1,420 a year, whereas average dual fuel users on the very cheapest deals will pay around £1,157.

If you're worried about prices rising, consider locking into a fixed deal now. Npower's Price Fix September 2016, for example, costs an average dual fuel user £1,320 a year and promises no hikes until 30 September 2016.

Meanwhile, EDF's Blue+Price Promise February 2015 is fixed until 28 February 2015, costing the average user £1,190 a year. Both tariffs also have no early exit fees, so if you want to leave early, if prices elsewhere get cheaper, you can.

Energy prices will however vary depending on your usage and where you live. You can use MoneySavingExpert.com's free Cheap Energy Club to find the best deal for you.

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